Implats says South Africa labor unrest huge risk

JOHANNESBURG (Reuters) - Industrial unrest at South Africa's platinum mines, resulting in the death of workers at Implats and rival Lonmin, is increasing the risks facing the sector as it grapples with low prices and rising costs, a senior executive said.

"We are walking a tightrope," said Terence Goodlace, newly installed chief executive at world No.2 platinum producer Impala Platinum (Implats).

"These developments pose a significant risk to the industry ... At this point we believe we have a measure of stability, but it is unreasonable to say nothing will happen to us," Goodlace said on Thursday, at a presentation on the company's results which showed a 38 percent drop in headline earnings to 685 cents per share from 1,105 cents.

The South African platinum industry has been hit by a wave of labor unrest, first at Implats' Rustenburg operations at the start of this year and more recently at Lonmin, which led to police killing 34 striking miners in a hail of bullets last week.

The violent six-week strike at Rustenburg sliced 21 percent off the company's production for the full year.

A bitter turf war between the dominant National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (AMCU) has threatened to spread across the platinum belt.

The NUM said on Thursday workers had returned to a mine operated by Royal Bafokeng Platinum after a stoppage on Wednesday.

Seeking a way through the labor disruptions and bloodshed, Goodlace said the world's largest platinum producers are discussing a move to collective bargaining.

The platinum sector currently negotiates with unions on a company-by-company basis, leaving individual firms open to labor discontent as rival organizations promise workers they can cut better deals.

This situation has also created wage disparities between platinum companies that do not exist in the gold and coal sectors which bargain collectively, fueling resentment.

COLLECTIVE BARGAINING

Gold and coal do so through the country's chamber of mines and Implats said it had joined the chamber, which would be a step toward bargaining under its roof. Lonmin and world no. 1 producer Anglo American Platinum are already chamber members.

Implats human resources executive Johan Theron warned that collective bargaining was not a magic solution but said it was a way to get industry players round a table.

Implats is awaiting the outcome of a union-approved independent audit on trade union membership at its Rustenburg operations, which may show that AMCU, regarded as more militant than the NUM, is the new top union there.

Three lives were claimed during the strike at Implats early this year. This cost Implats 120,000 ounces in lost production and 2.8 billion rand ($336.6 million) in revenue. Combined with low metal prices, this led to a sharp cut in its dividend, to 195 cents a share from 570 cents.

"We were hurt by the strike and the build up to pre-strike levels has been a lot slower than anticipated," said Goodlace.

Production for the 2012 financial year was down 21 percent at 1.45 million ounces. Cutting its capital expenditure by almost 1 billion rand, Implats said its operations were continually being assessed to ensure profitability.

Labor discontent is an added burden for South African platinum producers already struggling as input costs such as electricity and labor climb while metal prices remain sluggish.

The threat that production from South Africa, a supplier of 80 percent of the world's platinum, could be disrupted indefinitely has pushed the platinum price more than $160 an ounce higher in the past week.

But the longer-term outlook for the price of the white metal is dim as it is mostly used for emissions-capping catalytic converters in cars. Demand is especially weak in Europe, where platinum content is high in diesel converters.

($1 = 8.3193 South African rand)

(Editing by Ed Stoddard and David Holmes)